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‘Sickening': Sydney unit owners face levies of up to $220,000 to replace flammable cladding
Owners in a Sydney apartment building blindsided by eye-watering special levies of up to $220,000 to replace dangerous flammable cladding say they have been 'failed' at all levels and left facing ruinous out-of-pocket costs.
Sluggish remediation works, drawn-out legal battles and onerous retrospective changes to building codes have left many owners in a seemingly never-ending limbo.
Ferres Wang, 43, purchased her one-bedroom unit in Pyrmont's Harbour Mill Apartments off the plan in 2012 for $580,000.
The stunning development, built on the site of the old Edwin Davey & Sons Flour Mill near the Sydney Fish Markets, comprises 136 apartments across two 10-storey towers with a distinctive chequerboard exterior.
Ms Wang, a tech entrepreneur, said she was attracted to the location close to Darling Harbour.
'Also the design is quite cool,' she said.
The building, completed in 2015, was one of dozens identified as high-risk by the NSW government's cladding taskforce which undertook a survey of local properties in the wake of the 2017 Grenfell fire in London which claimed 72 lives.
But five years on from the initial fire safety order from the City of Sydney, and nearly two years after entering a contract with a cladding remediation firm, the multimillion-dollar works have stalled.
The builder, Hitech Remedial, has identified additional scope that will more than double its initial contract.
On Tuesday, owners will be asked to vote on variations totalling $5.96 million, including additional cladding removal, vertical cavity barriers and replacement balustrades.
The initial budget for the works was $7.8 million, $5.4 million of which was Hitech's contract. The works are being funded by a no-interest loan through the NSW government's Project Remediate, with up to $19.5 million available.
'The variations are required to properly undertake the work to remove and replace the ACP cladding, and deal with other issues identified during the repairs, and to comply with a fire order from City of Sydney Council to remove the ACP cladding,' Tuesday's strata meeting notice states.
Ms Wang said the huge additional cost has left residents stunned.
'On average, each owner here is now facing a $70,000 to $220,000 levy, and we've been warned that even more variations are coming next year,' said Ms Wang, who will be on the hook for $70,000 for her 60 square metre apartment if the variation is approved.
For penthouse owners, the bill will be up to $220,000.
'One is retired, he [told me] this is their entire life savings,' Ms Wang said.
It's expected residents will be required to begin paying special levies for the works in the first half of next year.
Ms Wang, who runs data and AI start-up DataNoLie, says she will be forced to divert money she would have used to invest in growing her business.
'For me this really is hardship,' she said.
'This is a systemic disaster for apartment owners across NSW. It feels like the entire system — strata, builder, tribunal, regulatory bodies — has failed us. The government's retrospective cladding laws place the full financial burden on owners, with no strong legal or audit mechanisms in place.'
Ms Wang filed a case with the NSW Civil and Administrative Tribunal (NCAT) seeking to block Tuesday's vote but her request for an urgent hearing before the meeting was denied.
'I was told this didn't qualify as 'hardship' despite the enormous financial burden and the lack of legal safeguards being followed,' she said.
Around 30 per cent of owners live in the building, and Ms Wang said meetings to approve the remediation budgets were only attended by around 30 people.
'More than 100 owners, they don't know, don't care or are Chinese investors overseas,' she said.
A spokeswoman for Hitech Remedial declined to comment, saying enquiries should be directed to Project Remediate.
The owners corporation has also commenced NSW Supreme Court proceedings against the original developer, Leichhardt-based Ceerose, over the cladding defects. That case is listed for a directions hearing in July.
'We confirm that there are legal proceedings brought by the owners corporation involving Ceerose which are currently in procedural directions stages and include claims related to cladding,' a Ceerose spokesman said. 'The proceedings are being defended by Ceerose.'
Similar stories are playing out across the state.
As of early 2023, the NSW government had inspected 4182 buildings, with remediation underway or ordered by the relevant authority for 192.
The NSW Audit Office found in April 2022 that most high-risk buildings in NSW had likely been identified.
A spokesman for the NSW Building Commission said Project Remediate was currently working with around 80 owners corporations to remove combustible cladding through packages of interest-free loans and construction program management services.
'The program also helps owners corporations to resolve underlying conditions that are sometimes revealed when cladding is removed, saving owners from potentially costly repairs in the future,' he said.
'This includes fixing issues with waterproofing or structural components of the building to ensure the new cladding system is safe, weatherproof and structurally sound. Where the underlying issues have been caused by defective work by the building's original builder or developer, NSW legislation allows owners to claim using statutory warranties and other protections available within the statutory periods specified under the legislation.'
Strata lawyer Amanda Farmer said since the closure of Project Remediate to new applications, owners had largely been left on their own.
'As far as I'm aware there is no state or federal grant program to help strata buildings cover the cost of replacement,' she said.
'What we're seeing is individual owners are now having to shoulder 100 per cent of these costs coming to them in the way of large special levies at are running into $30,000 a lot, $50,000, up to six figures. It's sickening.'
Ms Farmer cautioned against taking the legal route.
'The problem with suing is it takes many years to progress through the court system and you may end up with something of a Pyrrhic victory if the builder and developer have nothing, are straw companies by the end of it,' she said.
Other owners have previously sought remedy from builders and developers alleging breaches of statutory warranties under NSW's Home Building Act 1989.
In 2020, NSW passed the Design and Building Practitioners Act, which imposed new statutory obligations to ensure designs and building work are compliant with the Building Code of Australia (BCA), with a 10-year duty of care period.
'There may be now in NSW the opportunity to claim under a 10-year warranty period, [but] that's very new and still being tested through the courts,' Ms Farmer said.
'I think buildings should rightly be very careful commencing any litigation now. It can take years to resolve and in the meantime you're sitting in a building with potentially dangerous cladding.'
The harsh reality is owners in affected buildings have few options.
'A building has a very strict legal obligation to properly repair its common property, so if it has received advice from an expert fire safety engineer that this is dangerous combustible cladding then the law is very well settled, the owners corporation has to act on that and protect its occupants,' Ms Farmer said.
'It's a really unenviable position for strata owners to be in but from a legal perspective they don't have a choice.'
With remediation quotes typically running into multiple millions, many buildings are opting to take out strata loans offered by a handful of boutique lenders.
'It can be a 10 or 20-year loan at interest rates over 9 per cent,' Ms Farmer said.
'In my experience that is usually what most buildings are opting for because they're finding most owners don't have the cash funds. Having a strata loan on the books then impacts the value of everybody's investment. Purchasers looking to buy [will knock the price down].'
Ms Farmer said many owners were being forced to simply sell.
'That is sometimes the only option, and as I said it's a really difficult decision because you're going to be taking a hit on your sale price,' she said.
'If you're in a position you have to sell, you have to take what you can get. I'm definitely seeing more of that, not just in the cladding context but all around with our ageing buildings that need a lot of work very fast.'
In NSW, former Building Commissioner David Chandler oversaw the most extensive reforms to the state's defect-plagued apartment building sector in response to years of high-profile disasters, like the mass evacuation of residents from Opal Tower in Sydney Olympic Park on Christmas Eve 2018.
While the crackdown on dodgy developers was long overdue, concerns have been raised that the onerous requirements under the Design and Building Practitioners Act have sent remediation costs for older buildings soaring.
'The side effect of that very strict legislation is that it also applies to existing buildings, much older buildings that are doing remedial work,' Ms Farmer said.
'Works are now three times, four times more expensive under this new legislation. A leaking balcony that may have cost $50,000 to fix in 2020 is now costing $200,000. That is a big problem, and there's a fair bit of advocacy being done to government at the moment trying to get some relief.'
